A $225-million investment from a leading Chinese dairy processor is set to launch Canada back into the export game at a time when several of its major competitors are threatening a trade challenge over Canadian dairy prices.
Feihe International’s infant formula plant, now under construction in Kingston, Ont., plans to manufacture up to 60,000 tonnes of dry infant food annually, using milk from Canadian farms.
About 85 per cent of the baby formula will be shipped back to China to feed an anticipated baby boom, as the country’s one-child policy phases out.
“It was a signal that the Canadian dairy industry is open for business, that other countries want to come to do business in our industry,” said Graham Lloyd, the general manager of the Dairy Farmers of Ontario.
Open for business, but not everyone agrees the price they’re going to charge is fair.
The stakes are high. Canada’s dairy industry is bracing for more competition when the EU trade deal takes hold this September. Canada is under pressure from the U.S. and others to open its tightly regulated market even more in upcoming trade negotiations.
The new plant creates jobs. The demand for milk will rise. But it’s good news for another reason.
Feihe will separate cream from the skim milk it uses for formula. Other processors need it.
“Right now we have an overwhelming demand for cream and butterfat, in fact an unprecedented demand for it,” Lloyd said.
That’s the win-win situation the Canadian Dairy Commission envisioned when it set out to attract a new formula maker.
It’s been several decades since Canada courted new export markets for dairy. World Trade Organization changes in the early ’90s dramatically limited what supply-managed agriculture sectors could ship.
But as consumers rediscovered a taste for real butter and cream, Canada needed more uses for non-fat milk.
Selling skim milk powder internationally is “not a great market,” said CDC spokesperson Chantal Paul. “It was also clear, given what was happening at the WTO, that eventually we would not be able to do subsidized exports of skim milk powder.”
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